How do you feel when you look at your mortgage statement? Do you like where things stand, or are you hoping to make some major changes in the future?
It’s not the right decision for every homeowner, but there are many benefits of refinancing your mortgage. Here are five that will have you strongly considering this in the near future:
1. Lower Mortgage Rate
Did you secure your mortgage when rates were high? Are you able to secure a lower rate by refinancing?
If you have good or excellent credit, you’re likely to qualify for the lowest possible mortgage rate. Subsequently, you can lower your monthly payment, thus saving money for other areas of your budget.
As a general rule of thumb, it makes sense to refinance your mortgage if you can do so for one or more percentage point lower than your current rate.
2. Eliminate Your Adjustable Rate Mortgage
If you’re bogged down by an adjustable rate mortgage, a refinance may be the perfect solution. This allows you to switch to a fixed rate mortgage, hopefully at a lower rate.
Even better is the fact that a fixed rate mortgage provides more predictable future costs, which is beneficial to your budget. Since your rate never changes, your monthly payment always remains the same.
3. Shorten Your Term
For example, if you have 25 years left on a 30-year mortgage, you may find it difficult to see the end of the road.
However, if you refinance to a 15-year mortgage, you can immediately knock 10 years off your term. Even if it costs you extra money now, you’re going to save over the long run.
Tip: 15-year loans typically have lower rates than 30-year loans, so you may be able to keep a comparable monthly payment.
4. Borrow Money
Have you considered a cash-out refinance? This allows you to borrow money against the equity of your home, all while refinancing your mortgage.
You can use the money you receive for everything from a home improvement project to paying for your child’s education (and that’s just the start).
5. Eliminate Private Mortgage Insurance
If you didn’t put up a down payment of 20 percent or more when buying the home, your lender required you to purchase private mortgage insurance.
If you now have at least 20 percent equity in your property, you can refinance to eliminate private mortgage insurance. Not only do you rid yourself of this monthly expense built into your payment, but you can lower your rate at the same time.
With so many benefits of refinancing your mortgage, don’t hesitate to contact three to five lenders to discuss your situation and learn more about the process.
If you decide that it’s right for you, search around until you find a low rate from a reputable lender. Once the process is complete, you’ll realize that it’s had a positive impact on your finances.